Tumor necrosis factor (TNF) plays an important role in the pathogenesis of inflammatory bone loss through stimulation of osteoclastic bone resorption and inhibition of osteoblastic bone formation. Compared with the well established role of TNF in osteoclastogenesis, mechanisms by which TNF inhibits osteoblast function have not been fully determined. Runx2 is an osteoblast-specific transcription factor whose steady-state protein levels are regulated by proteasomal degradation, mediated by the E3 ubiquitin ligases, Smurf1 and Smurf2. We hypothesized that TNF inhibits osteoblast function through Smurf-mediated Runx2 degradation. We treated C2C12 and 2T3 osteoblast precursor cell lines and primary osteoblasts with TNF and found that TNF, but not interleukin-1, significantly increased Smurf1 and Smurf2 expression. TNF increased the degradation of endogenous or transfected Runx2 protein, which was blocked by treating cells with a proteasomal inhibitor or by infecting cells with small interfering (si)RNA against Smurf1 or Smurf2. TNF inhibited the expression of bone morphogenetic protein and transforming growth factor-beta signaling reporter constructs, and the inhibition of each was blocked by Smurf1 siRNA and Smurf2 siRNA, respectively. Overexpression of Smurf1 and/or Smurf2 siRNAs prevented the inhibitory effect of TNF on Runx2 reporter. Consistent with these in vitro findings, bones from TNF transgenic mice or TNF-injected wild type mice had increased Smurf1 and decreased Runx2 protein levels. We propose that one of the mechanisms by which TNF inhibits bone formation in inflammatory bone disorders is by promoting Runx2 proteasomal degradation through up-regulation of Smurf1 and Smurf2 expression.